AT&T: Wireless Boosts the Bundle

1/11/2008 7:00 PM Eastern

By: Mike Farrell

AT&T chairman and CEO Randall Stephenson said that the anchor for the triple-play bundle of the future will be wireless telephony, not wireline service. The telecom giant will be more aggressive this year both within its region and possibly outside its territory with the three-product bundle that includes wireless phone service, he said last week.

“In-region, without a doubt, it will continue to get more aggressive,” Stephenson said at the Citigroup Entertainment, Media & Telecommunications conference in Phoenix last Tuesday. “The triple-play option — wireless, broadband and video — that will be our strategic product set in the marketplace in-region. Out of the region, we'll see.”

That could bode well for the telco, which owns the largest wireless-telephony service provider in the country, AT&T Wireless.

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Stephenson said AT&T has seen a decline in access lines, but he attributed that more to customers that have given up their home landlines for wireless phones, not from competition from cable telephony. Wall Street was paying more attention to Stephenson's comment that

AT&T is expecting more softness in the consumer business because of the sluggish economy.

AT&T shares dipped to $37.14 per share (down $4.29) on Jan. 8, before rallying slightly to finish the day at $39.16, down 5.5% or $2.27 each.

But Leichtman Research Group founder and principal analyst Bruce Leichtman said that although a wireless, broadband and IPTV bundle makes sense for AT&T, a wireless/landline bundle would be more compelling.

Leichtman said that if AT&T was placing a wire in the home to provide broadband and IPTV service anyway, why wouldn't it also try to sell the customer a landline phone?

“It [wireless/broadband/video] is an odder bundle,” Leichtman said. “And of the bundles that are out there, it is not a consumer-intuitive bundle.”

Stephenson said video is an integral part of the bundle, adding that while AT&T has lost access lines to cable telephony, it was most affected by customers who abandoned wireline service altogether for wireless.

“I strongly believe the product set of the future is wireless broadband and video,” Stephenson said. “It's not a VoIP, broadband and video product, it's wireless, broadband and video. Wireless will continue to be the entry point into the home.”

Earlier Stephenson said that while some pundits have predicted that 20% of homes in the U.S. could be wireless-only in the future, he believes that the number could be higher than that.

Leichtman said that currently about 8% to 10% of homes are wireless-only. Getting to 20% penetration and beyond could take three to 10 years.

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Leichtman added that wireless-only customers are generally younger people who don't own their own homes and don't want to spend a lot of money on communications. “If you want to think about a bundle that targets young, renter-mobiles, you can think about it, but that's generally not the appetizing demographic that you're looking for,” he said.

Leichtman also disputed Stephenson's claim that AT&T's landline losses were more due to wireless than cable.

“Then why is there almost a 1-to-1 relationship of cable [telephony] gains and telco losses?” Leichtman asked.

AT&T has made gains through its U-Verse TV IPTV television product — it had about 126,000 U-Verse customers in the third quarter, more than double the 51,000 customers in the previous period. AT&T also resells satellite TV service from Dish Network and DirecTV outside of its telephone territory.